From The Masters: The Gospel According to Warren Buffett, Acclaimed Investment guru.

Mr Warren Buffett was ranked the worlds' second richest man in 2006 (Forbes, 2006). Yes, he's so rich he easily decided in 2006 to give away $37 billion in donations to The Bill and Melinda Gates Foundation and other charities, over the coming years. Fondly called " the Oracle of Omaha" (after Omaha, Nebraska, USA - his hometown and residence), he piled up his fortune investing through his Berkshire Hathaway company. It is said that $10,000 invested in that company when he took it over about 41 years ago (1965) is worth over $30 million today. Its share price, in October 2006, set a record as the first to hit the $100,000 per share mark on the NYSE. Mind-boggling figures, you'd say.

Lessons to Learn?
What did Warren Buffett invest in and what investment strategy, if any did he engage? Has there been a pattern to his investment actions? Are there things he did that could, to some extent be replicated? In short, can you engage his technique and achieve good results, even if not as deafening? And if things are looking a bit late for you, is it possible to groom your kids with some ideas from this investment sage?

This article is definitely too short to delve into the investment strategies of The Oracle. In fact, the study of his investment successes and those of other similarly massively successful investors will regularly feature here, as we seek to learn from their accomplishments. We hope you find value in that. But back to the strategies of our guest investor for today, Warren.

His Strategy
Simply put, Warren Buffett has been a value investor. Value investors aim for securities that are significantly under-priced - where the intrinsic value is much higher than what the market has currently priced the security. Value investing was the hallmark of Benjamin Graham (1894 - 1976), investment authority and seminal Wall Street figure. Warren readily accepts the influence of the former. Value investing is rooted in fundamental analysis - that search for the true value of securities in the belief that the market may not have priced them correctly. Value investors discover value stocks and dig in, waiting for the market to see its error and respond.

Disciplined Approach
It is important, too, to state that Mr Buffett has approached the market with strict discipline and focus. He has worked with his own chosen rules, almost completely ignoring the din of the market. Such was the case during the boom of tech stocks in the USA: it didn't fit his investment criteria, so he ignored the industry and its boom, until it eventually went burst by 2001/2002, causing undiscerning investors to lose heavily. In effect, Mr Buffet accepted the principle of value investing, developed his set of investment rules (his people talk of 'tenets') anchored in it and faced the market boldly with that framework. The result has been outstanding.

The Rules or Tenets
Let's just scratch these. Firstly, there's a fundamental criterion of business model: if he doesn't understand the business (interprets as inability to project its performance), he wouldn't invest - dot-com example. Besides, the competitiveness of the business is of major interest: it should have a strategic advantage. Warren Buffett also doesn't go for the short haul price gains. He picks companies that have the potential, based on his analysis, to generate excellent earnings in the future and buys into them. The management of the business gets strict evaluation as to its quality and bent for working to raise shareholder value. There's then the analysis of the financial performance potentials. Measures to judge profit margin, return on equity, gearing, etc are applied. The objective, in the end, is to from his opinion as to the intrinsic value of the stock as a basis to determine if it boasts an attractive under-valuation. Though technical analysis has worked for some, Mr Buffett's has chosen a non-charting system.

What to Note
It's good to note that he didn't make his staggering wealth without working hard on his investment selection process. He set his strategy and applied it in a disciplined manner. Being a value investor, he gave things time to mature, once he believed in his investment decisions. It wouldn't be that he never made mistakes or lost money. He has worked for the long haul and that has paid big dividend. You wouldn't doubt that if you approach even our own market with the same commitment, focus, patience and discipline, whatever your technique, you can also achieve outstanding results! Finally, it's good to learn that Warren Buffett does not believe in dynastic wealth. Like Bill Gates, he believes that much money to your children becomes some burden, not blessing. Unlike those who would loot the public treasury to reserve for their generations unborn, these men are giving out tonnes of money they legitimately earned and wanting their children to work themselves up too.

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